Question 1

Which regulatory body charters national banks?

Accepted Answer

A) the Federal Reserve 
B) the Federal Deposit Insurance Corporation 
C) the Comptroller of the Currency 
D) none of the above 
A) the Federal Reserve 
B) the Federal Deposit Insurance Corporation 
C) the Comptroller of the Currency 
D) none of the above

Question 2

Which bank regulatory agency has the sole regulatory authority over bank holding companies?

Accepted Answer

A) the Federal Deposit Insurance Corporation 
B) the Comptroller of the Currency 
C) the Federal Bank Holding Company Agency 
D) the Federal Reserve System 
A) the Federal Deposit Insurance Corporation 
B) the Comptroller of the Currency 
C) the Federal Bank Holding Company Agency 
D) the Federal Reserve System

Question 3

The driving force behind the securitization of mortgages and automobile loans has been

Accepted Answer

A) the rising regulatory constraints on substitute financial instruments. 
B) the desire of mortgage and auto lenders to exit this field of lending. 
C) the improvement in computer technology. 
D) the relaxation of regulatory restrictions on credit card operations. 
A) the rising regulatory constraints on substitute financial instruments. 
B) the desire of mortgage and auto lenders to exit this field of lending. 
C) the improvement in computer technology. 
D) the relaxation of regulatory restrictions on credit card operations.

Question 4

Eurodollars are

Accepted Answer

A) dollar-denominated deposits held in banks outside the United States. 
B) deposits held by U.S. banks in Europe. 
C) deposits held by U.S. banks in foreign countries. 
D) dollar-denominated deposits held in U.S. banks by Europeans. 
A) dollar-denominated deposits held in banks outside the United States. 
B) deposits held by U.S. banks in Europe. 
C) deposits held by U.S. banks in foreign countries. 
D) dollar-denominated deposits held in U.S. banks by Europeans.

Question 5

The traditional financial intermediation role of banking has been to make ________-term loans and to fund them with ________-term deposits.

Accepted Answer

A) short; long 
B) long; short 
C) short; short 
D) long; long 
A) short; long 
B) long; short 
C) short; short 
D) long; long

Question 6

The most significant change in the economic environment that changed the demand for financial products since 1970 has been

Accepted Answer

A) the aging of the baby-boomer generation. 
B) the dramatic increase in the volatility of interest rates. 
C) the dramatic increase in competition from foreign banks. 
D) the deregulation of financial institutions. 
A) the aging of the baby-boomer generation. 
B) the dramatic increase in the volatility of interest rates. 
C) the dramatic increase in competition from foreign banks. 
D) the deregulation of financial institutions.

Question 7

Explain the innovations that have been created to lower interest-rate risk.

Accepted Answer

There have been several innovations crea

Question 8

Deposits in European banks denominated in dollars for the purpose of international transactions are known as ________.

Accepted Answer

A) Eurodollars 
B) European Currency Units 
C) euros 
D) International Monetary Units 
A) Eurodollars 
B) European Currency Units 
C) euros 
D) International Monetary Units

Question 9

The legislation that separated investment banking from commercial banking was the

Accepted Answer

A) National Bank Act. 
B) Federal Reserve Act. 
C) Glass-Steagall Act. 
D) McFadden Act. 
A) National Bank Act. 
B) Federal Reserve Act. 
C) Glass-Steagall Act. 
D) McFadden Act.

Question 10

So-called fallen angels differ from junk bonds in that

Accepted Answer

A) junk bonds refer to previously issued bonds which have had their credit ratings fall below Baa. 
B) fallen angels refer to newly issued bonds with low credit ratings. 
C) junk bonds refer to newly issued bonds with low credit ratings. 
D) they are both A and B of the above. 
A) junk bonds refer to previously issued bonds which have had their credit ratings fall below Baa. 
B) fallen angels refer to newly issued bonds with low credit ratings. 
C) junk bonds refer to newly issued bonds with low credit ratings. 
D) they are both A and B of the above.

Question 11

The modern commercial banking system began in America when the

Accepted Answer

A) Bank of the United States was chartered in New York in 1801. 
B) Bank of North America was chartered in Philadelphia in 1782. 
C) Bank of the United States was chartered in Philadelphia in 1801. 
D) Bank of North America was chartered in New York in 1782. 
A) Bank of the United States was chartered in New York in 1801. 
B) Bank of North America was chartered in Philadelphia in 1782. 
C) Bank of the United States was chartered in Philadelphia in 1801. 
D) Bank of North America was chartered in New York in 1782.

Question 12

Burdensome regulations, along with inflation and rising interest rates, help to explain

Accepted Answer

A) the rapid pace of financial innovations in banking in the 1960s and 1970s. 
B) the low rate of bank failures in the 1980s. 
C) both A and B of the above. 
D) neither A nor B of the above. 
A) the rapid pace of financial innovations in banking in the 1960s and 1970s. 
B) the low rate of bank failures in the 1980s. 
C) both A and B of the above. 
D) neither A nor B of the above.

Question 13

Since the passage of the International Banking Act of 1978, the competitive advantage enjoyed by foreign banks has been ________.

Accepted Answer

A) reduced 
B) mildly expanded 
C) completely eliminated 
D) greatly expanded 
A) reduced 
B) mildly expanded 
C) completely eliminated 
D) greatly expanded

Question 14

Regulations restricting branching have promoted the development of what two financial innovations?

Accepted Answer

A) bank consolidation and nationwide banking 
B) bank holding companies and automated teller machines 
C) money market mutual funds and sweep accounts 
D) reserve requirements and restrictions on interest paid on deposits 
A) bank consolidation and nationwide banking 
B) bank holding companies and automated teller machines 
C) money market mutual funds and sweep accounts 
D) reserve requirements and restrictions on interest paid on deposits

Question 15

Are bank consolidations and nationwide banking good things? Why?

Accepted Answer

The answer of Are bank consolidations and nationwide banking good...

Question 16

Thrift institutions' importance as a source of funds for borrowers

Accepted Answer

A) has shrunk from around 40 percent of total credit advanced in the late 1970s to below 30 percent today. 
B) has shrunk from over 20 percent of total credit advanced in the late 1970s to below 10 percent today. 
C) has expanded dramatically, from around 15 percent of total credit advanced in the late 1970s to above 25 percent today. 
D) has expanded dramatically, from around 15 percent of total credit advanced in the late 1970s to above 30 percent today. 
A) has shrunk from around 40 percent of total credit advanced in the late 1970s to below 30 percent today. 
B) has shrunk from over 20 percent of total credit advanced in the late 1970s to below 10 percent today. 
C) has expanded dramatically, from around 15 percent of total credit advanced in the late 1970s to above 25 percent today. 
D) has expanded dramatically, from around 15 percent of total credit advanced in the late 1970s to above 30 percent today.

Question 17

Americans are the biggest users of checks in the world but nonetheless are ahead of Europeans in the proportion of noncash payments that are made by electronic means.

Accepted Answer

A) True 
 B)False

Question 18

U.S. banks have most of their foreign branches in

Accepted Answer

A) Latin America, the Far East, the Caribbean, and London. 
B) Latin America, the Middle East, the Caribbean, and London. 
C) Mexico, the Middle East, the Caribbean, and London. 
D) South America, the Middle East, the Caribbean, and Canada. 
A) Latin America, the Far East, the Caribbean, and London. 
B) Latin America, the Middle East, the Caribbean, and London. 
C) Mexico, the Middle East, the Caribbean, and London. 
D) South America, the Middle East, the Caribbean, and Canada.

Question 19

What are the reasons for the decline of traditional banking?

Accepted Answer

The answer of What are the reasons for the decline...

Question 20

Examples of financial services that became practical realities as the result of new computer technology include

Accepted Answer

A) credit cards. 
B) electronic banking facilities. 
C) checking accounts. 
D) all of the above. 
E) only A and B of the above. 
A) credit cards. 
B) electronic banking facilities. 
C) checking accounts. 
D) all of the above. 
E) only A and B of the above.

Exam 19: Banking Industry: Structure and Competition

Which regulatory body charters national banks?

Which bank regulatory agency has the sole regulatory authority over bank holding companies?

The driving force behind the securitization of mortgages and automobile loans has been

Eurodollars are

The traditional financial intermediation role of banking has been to make ________-term loans and to fund them with ________-term deposits.

The most significant change in the economic environment that changed the demand for financial products since 1970 has been

Explain the innovations that have been created to lower interest-rate risk.

Deposits in European banks denominated in dollars for the purpose of international transactions are known as ________.

The legislation that separated investment banking from commercial banking was the

So-called fallen angels differ from junk bonds in that

The modern commercial banking system began in America when the

Burdensome regulations, along with inflation and rising interest rates, help to explain

Since the passage of the International Banking Act of 1978, the competitive advantage enjoyed by foreign banks has been ________.

Regulations restricting branching have promoted the development of what two financial innovations?

Are bank consolidations and nationwide banking good things? Why?

Thrift institutions' importance as a source of funds for borrowers

Americans are the biggest users of checks in the world but nonetheless are ahead of Europeans in the proportion of noncash payments that are made by electronic means.

U.S. banks have most of their foreign branches in

What are the reasons for the decline of traditional banking?

Examples of financial services that became practical realities as the result of new computer technology include

Why Study Financial Markets and Institutions

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation

Why Do Interest Rates Change

How Do Risk and Term Structure Affect Interest Rates

Are Financial Markets Efficient

Why Do Financial Institutions Exist

Why Do Financial Crises Occur and Why Are They so Damaging to the Economy

Central Banks and the Federal Reserve System

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Bond Market

The Stock Market

The Mortgage Markets

The Foreign Exchange Market

The International Financial System

Banking and the Management of Financial Institutions

Financial Regulation

The Mutual Fund Industry

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging With Financial Derivatives

Savings Associations and Credit Unions

Finance Companies

Filters

The traditional financial intermediation role of banking has been to make -term loans and to fund them with -term deposits.